Saving can sound tedious, but when the time comes to cash out for tuition, your RESP should spark serious joy.
From car payments to childcare and maybe even a new home, you’re juggling a lot of financial obligations. Investing in a Registered Education Savings Plan (RESP) – which doesn’t serve up the high of a weekend getaway – can feel like a downer. However, there are so many upsides to saving for your little one sooner rather than later.
The federal government supports education savings through the Canada Education Savings Grant (CESG), topping up your contribution by 20%. You can score up to a maximum of $500 per year and $7,200 over the RESP’s lifetime – and that extra cash can gain investment earnings. Low-income families could also be eligible for the Canada Learning Bond (CLB), which could provide an additional incentive of $500 on the first year of eligibility and $100 each year the child continues to be eligible up to a maximum of $2,000. The final contribution is based on a family’s household income and number of children. And be sure to check with your provincial government; some of them have additional grants available.
Automated payments make RESP contributions easy – but don’t go on autopilot when it comes to investing those savings. Financial advisors are trained to maximize your investment and show you how to make gains on your RESP over its lifetime, whether you start when your child is just a baby or already in junior high. Ask about equity mutual funds, which have exposure to the stock market and offer a long-term opportunity for more growth. However, if your student is a teen, your financial advisor may recommend to stick to safer investments, such as fixed income mutual funds.
Even more money
When a bonus or windfall comes in, or your aunt gives you birthday money for the kids, bump up your RESP deposits, or make a lump sum contribution, instead of getting a new gadget. If you’re not already tapping into available grants, this money can help you get the incentives you may be entitled to. (By the way, only half of Canadians are cashing in on the CESG.) The greatest gift you can give your future painter, professor or pastry chef is helping them foot the bill for their education.
You’ve got money
There’s lots of RESP talk about maximizing contributions and reaching the lifetime limit of $50,000. The reality is that saving that much money isn’t possible for many Canadians. However, that doesn’t mean an RESP is impossible to jumpstart. Get mindful about your money, even a small, regular contribution that you would otherwise spend on nice-to-haves (as opposed to life’s must-haves) could make a difference for your child’s future.